New tariff rules to boost renewable energy sector

NEW DELHI: The Central Electricity Regulatory Commission (CERC) on Thursday announced tariff norms for electricity generated from renewable energy sources such as solar, wind and biomass.

The new tariff regime will offer 19% on pre-tax return on investment (ROI) in new projects for the first 10 years and 23% in the subsequent period.

"The new tariff regulations are expected to promote investments in renewable sector that is also required to meet the goals stipulated in the National Action Plan on Climate Change," CERC chairman Pramod Deo said.

While notifying tariff regulations for electricity generated from renewable energy sources, the power sector regulator said that specifying capital cost norms and fixing tariff upfront for the whole tariff period are the two main features of the new regulations.

The tariff permitted to a project under these regulations would apply for the whole tariff period, which is 13 years for wind power projects, 25 years for solar power projects and for small hydro (below 5mw) it has been kept as 35 years, another CERC official said.

However, the regulations provide normative capital costs for projects based on different renewable technologies and they will be revised every year for incorporating escalation.

"This is important especially for solar as the data available with us is scanty and mostly from outside the country. As we get more data for solar, producers can come and file a separate petition for revision," Mr Deo said.

The regulations are significant in view of the National Action Plan on Climate Change which stipulates that minimum renewable purchase standards may be set at 5% of the total power purchases by 2010. At present, only 3% power is generated through renewable sources such as wind and solar.

CERC and other state regulators have also agreed to implement renewable energy certificate (REC) mechanism which will allow states with less renewable energy sources to purchase RECs, from those that have excess of it, to fulfil renewable purchase obligations.